Nexo heads for the hills just as California unleashes a wave of suits

September 27, 2022

Montana Loans

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announced that it had acquired a minority stake in a Rocky Mountain banking company that is turning into a fintech just a day after California began a ripple effect of state lawsuits against the cryptocurrency lender.

Summit National Bank, which is owned by Hulett Bancorp, holds a federal banking charter with the Office of the Comptroller of the Currency, which Nexo said has reviewed its investment. This OK will allow Nexo to offer products such as checking accounts and crypto loans, according to a company statement

The move could allow Nexo to offer crypto products in a federally regulated environment, even as states question its business practices. The lender did not respond to repeated requests for comment on its strategy and whether its deal with Summit was aimed at resolving its issues with state governments.

Just 24 hours prior, the California Department of Financial Protection and Innovation issued a cease and desist order after claiming that Nexo’s interest-bearing crypto accounts were securities.

On the East Coast, New York Attorney General Letitia James has announced legal action against the lender and is seeking to permanently ban Nexo from selling securities in the state.

“Nexo has violated the law and the trust of investors by falsely claiming that it is a licensed and registered platform. Nexo must end its illegal operations and take the necessary steps to protect its investors,” James said in a statement. statement.

The Swiss-based company is now facing individual lawsuits from states, including Vermont, Washington, Mayland, Oklahoma, Caroline from the south and Kentuckyfollowing California and New York moves.

Nexo’s business model of offering generous interest against crypto deposits is reminiscent of the approaches of Voyager Digital and Celsius
Network, both of which fell into bankruptcy court as falling currency prices upended their business models. Nexo appears to have avoided that fate, but heightened regulatory scrutiny as the so-called crypto winter unfolds is another matter.

Summit is a bank with Pitches in Idaho, Montana and Wyoming. Nexo said it is “reinventing itself as a modern digital FinTech bank”.